The U.S. Court of Appeals for the Ninth Circuit upheld a copyright infringement finding against the Los Angeles County Sheriff’s Department and found it was not entitled to a fair use defense in a situation where it installed software beyond the number of licenses it had purchased. The Court upheld the finding notwithstanding the fact that the computers were configured such that the total number of computers that could access the software at any one time was limited to the number of licenses purchased. Wall Data Inc. v. Los Angeles County Sheriff’s Dept., No. 03-56559, 2006 U.S. App. LEXIS 12100, (9th Cir. May 17, 2006) (Pregerson, J.).
Wall Data develops, markets and sells a copyrighted computer terminal emulation software program called RUMBA. The Sheriff’s Department purchased 3,663 licenses to the software. To ensure that its employees would be able to access the software at whatever computer they were assigned to work, the Sheriff’s Department used hard drive imaging to install the software onto 6,007 different computers.
Although RUMBA software was installed on almost every computer in its facility, the department configured the computers with passwords limiting the number of people who could access the software at any given time to the number of licenses actually purchased. The Ninth Circuit upheld the trial court’s determination that the Sheriff’s Department was not entitled to a "fair use" defense under 17 U.S.C. § 117(a)(1) and was liable for copyright infringement.
To determine whether the Sheriff’s Department was entitled to a fair use defense, the Court balanced the fair use factors: (1) the purpose and character of the use, including whether such use is of a commercial nature or is for non-profit educational purposes; (2) the nature of the copyrighted work; (3) the amount and substantiality of the portion used in relation to the copyrighted work as a whole; and (4) the effect of the use upon the potential market for or value of the copyrighted work.
In weighing the factors, the Court found that the Sheriff’s Department had installed the software on multiple computers to save the expense of purchasing additional authorized copies and, therefore, determined the "purpose and character" of the use was commercial. The Court also found the use was not transformative because the Sheriff’s Department created exact copies of the RUMBA software and used those copies for the identical purpose of that of the original software. The Court then rejected the Sheriff Department’s argument "that its copying was solely an attempt to use efficiently its licensed copies of the RUMBA software products, and accordingly, there was no negative impact on Wall Data’s market." The Court stated that the "Sheriff’s Department could have bargained for the flexibility it desired, but it did not. Whenever a user puts copyrighted software to uses beyond the uses it bargained for, it affects the legitimate market for the product."
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